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Risks That Compliance Officers Should Look For

Question: 
Would you please describe the types of fair-lending risks compliance officers should look for?
Answer: 

Regulators expect financial institutions to conduct formal, fair-lending self- assessments to ensure that no products, policies or procedures leave room for discriminatory, unfair, deceptive, abusive or predatory acts or practices. As a financial institution's compliance team reviews each area of focus, they should be on the lookout for two primary types of fair-lending risks: inherent and residual.

Inherent risk is associated with violating fair-lending-related rules or regulations. It occurs when a financial institution's products, policies and procedures do not implement adequate fair-lending safeguards. Residual risk occurs when the policies and procedures established to manage fair-lending risk do not, in fact, ensure fair lending. Residual risk also occurs through noncompliance with these policies, practices and procedures.

First published on 04/30/2012

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